Construction Starts Forecast for Summer 2025: Economic Headwinds Weigh on Outlook

• We expect a contraction in total US Construction Starts by 1.8% in 2025. 
  
  
• Several factors are driving this expectation, including a worsening economic outlook, ongoing tariff uncertainty, and persistent inflationary pressures.
  
  
• Policy uncertainty, particularly around tariffs and trade, is expected to disrupt supply chains and dampen business investment.

In our Summer Construction Starts Forecast, we expect total US construction starts to contract by 1.8% in 2025. 

Several factors are driving this expectation, including a worsening economic outlook, ongoing tariff uncertainty, and persistent inflationary pressures.

These headwinds are expected to weigh on residential and nonresidential building activity, which is forecasted to decline over the year.

Our outlook for the US economy has been scaled down over the last quarter. We expect real GDP growth of 1.2% in 2025, well below the economy’s short-run potential growth rate.

Households will have to contend with higher prices, tighter financial conditions, and a weaker labor market. Policy uncertainty, upturned supply chains, and weaker demand are likely to overwhelm businesses.

While we have not added a recession in our baseline forecast, recent market turbulence appears to have brought both the consumer and investment community very close to the “edge” from where it is very possible that we could fall into a recession.

Key Takeaways

United States 2025 Construction Starts Forecast

• Total Construction Starts: Expected to fall by 1.8% in 2025, reversing the rebound seen in 2024. This follows a 12.6% year-over-year decrease in Q1 2025.
  
  
• Civil Construction: Civil construction through April is up 6.9%. However, growth is projected to stagnate for the remainder of the year, unable to offset declines in other segments.
  
  
• Residential & Nonresidential Buildings: Both sectors are forecasted to contract in 2025, reflecting reduced demand, tighter financing conditions, and elevated construction costs.
  
  
• Economic Outlook: Real GDP growth is now projected at 1.2% for 2025, a notable downgrade from earlier forecasts and well below the US economy’s potential. Policy uncertainty, particularly around tariffs and trade, is expected to disrupt supply chains and dampen business investment.
  
  
• Interest Rates: The Federal Reserve is likely to keep rates elevated this year as inflation remains above target. Many forecasters expect only one or two 25-basis-point cuts by December.
  
  
• Beyond 2025: Looking past the coming year, our medium-term outlook has been marginally downgraded as the economy struggles to recover from the multiple shocks of 2025: expected cuts to immigration eroding the construction labor force, and businesses taking time to adapt to the costs of the tariffs.

Canada 2025 Construction Starts Forecast

• Total Construction Starts: Forecast to decline by 8.6% in 2025.
  
  
• Sector Breakdown: Both Residential and Nonresidential building construction are expected to fall in tandem, constrained by macroeconomic headwinds and weaker investment appetite.
  
  
• Civil Construction: Projected to expand, but not enough to offset declines elsewhere.

Read the latest quarterly Construction Starts Forecast Report to get a five-year forecast of construction starts by type of structure and by state, as well as drivers influencing each building sector.

Get the Summer 2025 Construction Starts Forecast

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